Our rent is $800 a month right now, if we can find a condo to buy that’s about the same payment, wouldn’t it make sense to buy?

Wrong! Logic says an $800 mortgage payment is better than $800 rent. But it’s not about logic – it’s not that simple. If you’ve got other debt, those payments doesn’t go away. You’ll have almost no down payment, so you’re probably need a 35-year mortgage, or interest only payment. Both of those are a very very bad idea.
Then you have insurance and taxes, as well as all those utility bills, which are likely included in your rent right now. In reality, $800 is more like $1300.

And you know that Murphy will move into your spare bedroom, and something WILL go wrong, and you’re hooped. Yes, Murphy’s law will come to visit you. The roof will leak, there’ll be some electrical problems, or whatever issue, and you’re going into more debt. Or you’ll need new appliances, convince yourself you should have some more, or some new furniture, and that’s all getting financed as well.

Take the low rent, save the full 20% down payment so you can avoid the huge mortgage insurance premiums, and get debt free first. Renting isn’t a sin, and it’s not forever! But it is risk free. I want you to buy a home when it can be a blessing and not a curse.

My husband and I are in our late 40s. His net is $39,000 and mine is $20,000. We have a variable mortgage of $160,000 @ 2.25%, a line of credit of $8200, and $30,000 in RRSPs. After all our monthly expenses, and living bare bones style, we are left with $1,800 a month. With that money, do we pay off our line of credit, put towards extra mortgage payments, or more savings?

Paying off debt always comes first. Pay off that line of credit and close it, so that you’re not going to be going backwards again down the road. That will be a great Christmas present to both of you this year, as it should be done in four months!

I would not pay extra on the mortgage at your interest rate right now. The next step after you get totally out of debt with that line of credit is to get a savings account with three months of net income in it. That’ll give you a huge cushion for any emergency. It should just be a simple savings account, NOT hooked up to your ATM card. It never gets touched. It will turn almost all emergencies into inconveniences and avoid the stress of not having the money, or borrowing again.

You are not in a big tax bracket, so check out the Tax Free Savings Accounts (TFSA), which also shelter your income, but does not tax you when you take it out. RRSPs are great for higher tax bracket people who will be in a lower bracket when they draw the money in retirement. You can save $5000 a year for each of you per year.

Your consumer debt is gone, three months savings are in the bank, the TFSA at $5,000 for each of you, the rest of the money can go to the mortgage. Due to the nature of your husbands’ job, and probably for most of us, you also need to budget some separate savings for a vehicle replacement down the road.

You two are really doing well with your finances. Do give yourself full credit for absolutely winning already!